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African Lion Economies Gear up to Emulate Asia

Continent's middle class is growing rapidly, but politics and corruption continue to threaten business growth.

ThankGod Agbagu views the paved roads and skyscrapers that have sprung up in Lagos, Africa’s largest city, as the signs of a brighter future.

“That’s development, progress,” the 30-year-old tailor said in a July 30 phone interview from Nigeria’s commercial capital. “I definitely see many opportunities out there. Things may not really get better in my lifetime, but maybe it will for those that come after us.”

A two-decade surge in growth in Africa suggests the poorest continent is starting to come to grips with its challenges and has raised the prospect of the “African lions” emulating the “Asian tiger” economies in the 21st century. Africa’s advantages include vast untapped resources, a youthful population, and an expanding middle class. Offsetting these are rampant poverty and inequality, a rise in Islamist militant violence, and appalling infrastructure.

Data collated by the African Development Bank support the premise of an Africa on the rise: Average life expectancy rose to 58 in 2011, from 37 in 1950, and primary school enrollment climbed to 77 percent in 2011, from 52 percent in 1990. Governance improved in 46 of 52 African countries in the 13 years through 2013, according to the Mo Ibrahim Foundation, which takes into account indicators such as safety and rule of law, human rights, and economic progress.

“There’s nothing to stop Africa from benefiting from the reforms that we’ve seen, to capitalize on that going forward, do more and become a stronger, faster-growing, more inclusive region like Asia,” Stuart Culverhouse, chief economist at Exotix Partners LLP, said by phone from London on July 25.

The International Monetary Fund said July 24 it estimates sub-Saharan Africa’s economies will grow 5.4 percent this year and 5.8 percent in 2015, compared with 1.7 percent and 3 percent in the U.S. for the same two years respectively. The Washington-based IMF projected Chinese growth at 7.4 percent this year and 7.1 percent in 2015.

Nigeria’s economy, Africa’s largest, has the potential to expand about 7.1 percent a year through 2030, McKinsey & Co. said in a July 24 report. That would make it one of the world’s top 20 economies, with a consumer base exceeding the current populations of France and Germany, according to the New York-based company.

Leaders Summit

U.S. President Barack Obama will host more than 40 African leaders at a three-day gathering that begins in Washington today. The U.S.-Africa Leaders Summit is aimed at boosting economic ties and addressing Africa’s infrastructure and investment shortage.

“Africa has come a very long way from its era of aid dependence,” Sim Tshabalala, co-chief executive officer of Standard Bank Group Ltd., Africa’s largest lender, said in emailed comments today. “The rapidly emerging middle class in Africa is driving large-scale diversification of Africa’s economies, which offers immense opportunities for companies willing to invest.”

Africa’s share of the global economy could triple by 2050, while average per-capita income could surge sixfold and 1.4 billion more Africans could join the middle class, under the most optimistic of scenarios sketched out in a study commissioned by the African Union and the Economic Commission for Africa. Prerequisites would be capable states, pragmatic leadership, strong institutions, peace and security and respect for the rule of law.

Yet peace remains elusive in several African nations.

In Nigeria, Boko Haram rebels have been fighting security forces for the past five years in a bid to impose Islamic law. The violence, which has spilled into neighboring Cameroon, claimed more than 2,053 lives in the first half of this year, according to New York-based Human Rights Watch.

Conflicts have also been raging in South Sudan, the Central African Republic, and Somalia, while an al-Qaeda-linked militant group, al-Shabaab, has staged attacks in Kenya, killing dozens of people.

While hostility constrains economic development, the number of affected African countries has declined markedly over the past few decades, said Jacques Verreynne, an economist at NKC Independent Economists in Paarl, near Cape Town.

“The overall economic prospects for Africa are positive,” Verreyenne said in an e-mailed response to questions on July 28. “Countries that have built up a proven track record of prudent policymaking and a willingness to reform have every chance of continuing to attract substantial amounts of foreign direct investment.”

Africa secured 5.7 percent of global foreign direct investment projects last year, up from 3.6 percent a decade earlier, accounting firm EY said in its 2014 Africa Attractiveness Survey, released on May 15. More than 400,000 new companies were registered on the continent last year, according to the Tunis-based African Development Bank.

“There are more business opportunities here than elsewhere,” Ghanaian Sebastian van Leeuwen, 35, who co-owns a property rental company and cleaning business, said in a July 29 interview from Accra. “The market is less saturated and there is less competition.”

The rosy economic data and outlook mask the abysmal living standards that still confront most of Africa’s 1.1 billion people.

Ebola Outbreak

The worst-ever outbreak of the Ebola virus in Guinea, Liberia, and Sierra Leone, which has claimed more than 800 lives since March, has highlighted West Africa’s health-care deficiencies. The disease, which is spread via contact with bodily secretions and can cause bleeding from the eyes, ears, and nose, kills as many as 90 percent of those who contract it.

African nations occupied the bottom 18 positions in the United Nations Development Program’s 2014 ranking of levels of development in 187 nations. About 72 percent of sub-Saharan Africa’s population, or 585 million people, live in or on the brink of poverty, the agency said in a July 24 report.

Africa has the potential to help itself, with the number of oil- and gas-producing nations set to rise to 45 within a decade from 22 currently, said Renfrew Christie, dean of research at the University of the Western Cape in Cape Town.

“This will bring large new money, which could be used for investment and education,” Christie said in an e-mailed response to questions on July 29. “But oil has caused war throughout history, as evidenced by the Middle East right now. It’s vital we keep the peace so oil and gas money can be invested productively.”

While Islamist militant violence is on the rise in Africa, it doesn’t pose the same threat to stability and growth as civil wars and violent coups, which are on the decline, according to Mark Rosenberg, Africa director at Eurasia Group in New York.

“A longer-term risk to the ‘Africa Rising’ scenario is the potential for jobless growth,” Rosenberg said in an emailed response to questions on July 25. “It’s not yet clear that current growth paths will create jobs for newly urban citizens with higher expectations and access to more information.”

Winners, Losers

Robert Schrire, a politics professor at the University of Cape Town, expects African nations to show varying degrees of progress, depending on how they address security and governance challenges.

“People are always looking for the new Asia,” he said in a July 25 phone interview. “I think Africa is going to be one of those stories that is always seen as promising but never actually delivers. There may be some winners, like Botswana. There are going to be chronic failures—probably Congo and Angola. I’m not too optimistic about Nigeria, and it’s touch-and-go for South Africa.”

Rehema Juma, a Kenyan business developer, sees Africa taking decades to realize its full potential.

“For now I don’t see things changing,” Juma, 30, said in a July 26 interview in Nairobi. “Politics and corruption will stifle development no matter how many resources we discover. Probably my grandchildren may see a change and a bright Africa, when our democracy matures and corruption gets minimized.”

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